According to the research report by WitsView , a divison of TrendForce , on the supply and demand situation for large-sized panels, production capacity expansions by three of China's production lines and the 8.5 Gen production line belonging to Taiwan's AU Optronics have brought about the 202.4 million square-meter supply area in 2018, presenting a growth of 7.9% YoY, the largest since 2013. TV panel demand was driven up by the FIFA fever and profit cuts in the first half-year , while PC panel demand benefited from specification upgrades and the rising demand in gaming, with overall demand area covering 198.5 million square meters, a growth of 9.5% YoY. The glut ratio for the entire 2018 year shrank from the projected 2.4% to 2%.
WitsView Research Manager Iris Hu points out that CSOT Gen 11, Chuzhou HKC's Gen 8.6 and SIO's Gen 10.5 production lines will contribute to supply in 2019 as the three new production lines from last year ramp up production and go full throttle. Thus even if SDC converts its Gen 8.5 LCD production capacity to QD-OLED in May and September this year, total supply area would still experience growth, projected to reach 9.6% YoY.
On the demand side, NB panel demand continues to suffer from and remain suppressed by the CPU shortage this year. Monitor panels continue to reduce in scale for small-size products, with the focus placed on borderless and 23W and up niche products. Although IT demand isn't looking too well, this year sees a clear transition in TV panel demand towards products 50 inches and above, which will help raise the demand area for large TV panels by a growth of 9.3% YoY to 217 million square meters. With large panel supply area growing faster than demand this year, the glut ratio will expand up to 2.2%.
CPU Shortage and Inventory Clearance Still Underway; IT Panels Continue to See Weakening Demand in 2Q
The four major applications have all dropped in demand in the traditional offseason that is 1Q, with total demand area declining by 6.1% compared to 4Q last year. Among them, NB panel demand has been especially quiet during the offseason under the previous yet-to -be-cleared inventories and the continual shortage in CPUs. For monitor panels, brands last year prepared their inventories in case the US-China trade dispute caused overall device costs to pile up, and proceeded to lower panel procurements one after another in 1Q to control inventory levels. Growth for TV product sizes in demand rose as prices for large products 55 inches and above hit the sweet spot. Panel manufacturers focused production capacities old and new on products 50 inches and above, causing mid- and small-sized product supply to tighten up,further motivating panel manufacturers to raise prices.
As for the supply situation in the first season, SDP's Gen 10 production line continued annual maintenance in January, while CPT (Chunghwa Picture Tubes Ltd.) couldn't get its plant moving due to the unsuccessful application for recapitalization and a lack of funds. Chengdu CEC's Gen 8.6 production line also decreased production as a result of the offseason. Various reasons caused the supply area to drop by 3.3% compared to the fourth quarter last year. The glut ratio for large panels as a whole reached 5.5% in 1Q.
Demand in the second season may make a gradual return, but two market developments deserve attention: First, TV panels may face a COF film undersupply crisis, but may also cause the upward price trend to spread from small- and mid-size panels towards large size panels; second, IT panel demand didn't recover due to factors such as CPU undersupply and adjustments of panel inventories, leading to the non-existent possibility for panel prices to bounce back up. Overall, due to the predicted shortage in the 32 inch and 43 inch TV panel market for 2Q, customers will be stocking up preemptively, consequently bringing panel supply area in 2Q up to 6.3%. On the supply side, SDC closed production lines a month early, causing panel supply area growth to lie lower than demand. This shrank the glut ratio for 2Q to 5.1% compared to the last season,bringing up prices for sizes of tightening supply.